The Financial Inclusion Challenge

Key Facts . The Causes of Financial Exclusion . Making Markets Work .

Defining Financial Inclusion

Consumers have a set of core financial needs that need to be met if they are to be financially secure and to participate fully and fairly in society. Financial products and services are just a means to an end.

Not everyone will have the same needs and expectations of course but we believe the following core areas are priorities:

  • a transactional bank account is a mechanism for participating fairly and fully in a modern market based society;
  • consumers need income and assets to participate in society;
  • pensions and annuities are vehicles for allowing consumers to accumulate assets to provide a decent income in retirement;
  • access to decent health and social care – particularly important given the massive changes in demographics putting pressure on state funded health care systems;
  • housing – fair and affordable mortgages are critical for meeting the government’s home ownership targets;
  • access to fair and affordable credit allows consumers to smooth peaks and troughs of income and/ or enhance lifestyles. Conversely, overindebtedness is causing real misery for households and communities;
  • insurance protects consumers against the risks and shocks life throws at them and provides peace of mind;
  • financially capable and confident consumers are better placed to function in a society where financial services play an increasingly important role in people’s lives;
  • in an increasingly complex, unpredictable, and uncertain world access to objective financial advice and information is becoming as important as access to advice on health care.

The Centre’s work therefore focuses on making sure that consumers’ core financial needs are met fairly and effectively.

Consumers are not homogenous and are affected in different ways. It is important not to simplify but the Centre focuses its activities on two distinct groups:

Financially underprovided/ insecure: these are consumers who could afford to provide for their core financial needs but aren’t doing so because of demand and supply side factors such as low levels of confidence and trust in financial services, psychological barriers, financial awareness, and supply side factors preventing the market meeting their needs.

Financially excluded: this refers to the ‘traditional’ excluded consumers who because of a combination of low disposable incomes and the economics of access in retail financial services are not commercially viable for mainstream retail financial providers. Alternative business models are needed to change the economics of access and develop affordable products, to complement existing provision.